Grading based on a scale of one to five points

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Eligibility criteria

IPO grading

includes an assessment of business and financial prospects, management quality and corporate governance of the company.

Mumbai, Aug. 10

Crisil has rated initial public offerings (IPOs) of Shree Ashtavinayak Cine Vision Ltd and Minar International Ltd as having `below average fundamentals'. Both the IPOs have been rated `2' on a scale of one to five.

The grading is based on a scale of one to five points. Five points indicate strong fundamentals of the company, descending down to poor fundamentals for one point.

According to Crisil, this is the first rating of IPOs by Crisil, after it launched the service.

While Shree Ashtavinayak has proposed a public issue of 33 lakh equity shares at a target price of Rs 158 per share, Minar International is going in for an issue of 80 lakh equity shares at a target price of Rs 170 per share.

In the case of Shree Ashtavinayak, the grading reflects the successful track record of the management, which has created a name for itself in a short span of three years, and the fact that the company is a leading film producer and distributor in the Mumbai territory.

The grading is, however, constrained by the risks inherent in the film industry. Also, the company has a relatively short track record of proven performance, has a high dependence on the skills of its managing director and majority shareholder, and has a relatively under developed corporate governance system, the release said.

In the case of Minar International, Crisil said the grading reflects the good track record of the promoter who has a cumulative experience of over 40 years in the textiles business and the strong growth prospects for export of made-up textiles from India to the US, which is expected to nearly double over the next five years. But the grading is constrained by the company's high dependence on the skills of the promoter for business continuity, the lack of adequate experience in setting up or running large textile manufacturing facilities, the inexperienced second line of management and a challenging business environment post removal of quotas and other issues.

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(This article was published in the Business Line print edition dated August 11, 2006)
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